10) A major weakness of a partnership is ________. A) the difficulty in maintaining owners’ control B) the difficulty in liquidating or transferring ownership C) the double taxation of income D) its high organizational costs
11) Which of the following is a strength of a corporation? A) low taxes B) limited liability C) low organization costs D) less government regulation
12) Which of the following legal forms of organizations is characterized by unlimited liability? A) sole proprietorship B) limited partnership C) corporation D) C-corporation
13) Which of the following is the purest and most basic form of corporate ownership? A) bond B) notes C) common stock D) preferred stock
14) Which of the following is true of a partnership and a corporation? A) In a corporation, income is taxed at the corporate level; whereas, in a partnership, income is taxed twice. B) In a partnership, income is taxed at the corporate level; whereas, in a corporation, income is taxed twice. C) Income from both forms of organizations are double-taxed. D) In a partnership, income is exempted from tax up to $10 million; whereas, in a corporation, income is taxed twice.
15) Which of the following is true of sole proprietorships and corporations? A) It is difficult to transfer ownership of corporations compared to that of sole proprietorships. B) Income from both forms of organizations are taxed only at the corporate level. C) Both sole proprietorships and corporations are equally scrutinized and regulated by government bodies. D) In sole proprietorships, owners have unlimited liability; whereas, in corporations, owners have limited liability.
1.3 Describe the goal of the firm, and explain why maximizing the value of the firm is an appropriate goal for a business.
1) High net cash flow with fixed risk is generally associated with a higher share price.
2) When considering a firm’s financial decision alternative, financial managers should accept only those actions that are expected to increase the firm’s profitability.